Corus Settles, To Pay $7 Million

U.s Had Filed Suit Over Handling Of Student Loans

April 08, 2000|By John Schmeltzer and Melissa Wahl.

Corus Bankshares Inc., the Chicago-based parent of Corus Bank, has agreed to pay $7.77 million to the U.S. Department of Education and waive seeking reimbursement of $3.5 million to settle charges it fraudulently sought reimbursement for millions of dollars in defaulted student loans.

In addition, William Kroeplin pleaded guilty to a misdemeanor fraud count in connection with some of the loan claims that were processed while he was the supervisor of the bank's student loan processing unit. He is to be sentenced in June.

The federal investigation began nearly six years ago when Corus reported it improperly sought reimbursement for some student loans. The loans were part of a package the bank acquired when it dramatically expanded its processing operation by buying $300 million in loan portfolios from banks nationwide, said Asst. U.S. Atty. Joseph Ferguson.

The U.S. attorney's office filed suit last year when Corus and federal officials were unable to reach a settlement.

"I'm pleased that this matter has been settled and that it is now behind us," said Robert Glickman, chief executive of Corus.

The student loan program, the Federal Family Education Loan, formerly the Guaranteed Student Loan, makes low-interest loans to students for their college education. In the event of default, loans are insured by non-profit guaranty agencies that are underwritten by the federal government.

While Corus turned itself in to the Education Department, the investigation concluded that the fraud "was far greater than that initially disclosed by Corus," Ferguson said.

Corus had waited for more than a year before it disclosed in January 1996 that it had fired several employees and notified the Education Department that it discoveredemployeeshad allegedly falsified records of phone calls to some students whose loans were delinquent.

Federal regulations require a bank to make eight phone calls to students who have failed to keep up on payments. The calls are followed up with letters.

Since discovery of the actions in the loan unit, the bank, which is being allowed to continue participating in the loan program, has installed a computer system that checks calls logged by employees against a record of calls actually made.

Kroeplin, now an assistant vice president at the banking company, has been on a paid leave of absence for several months, Glickman said.

Bank management wants Kroeplin to come back to work but must have approval from the Federal Deposit Insurance Corp., Glickman said. And the FDIC cannot decide on the matter until Kroeplin has been sentenced.

"We are sympathetic to Mr. Kroeplin," Glickman said. "While he is the one who probably made more of the errors that gave rise to this issue, none of it had to do with him stealing money from the bank."

Corus stock, which is half owned by the Glickman family, rose $2.25 to $26.25 a share on Friday in Nasdaq trading.